Supreme Court Weighs Patent Dispute Between Drug Makers

By Kristen Friend, staff writer – December 7, 2011

The big, albeit unsurprising, news of the current term is the Supreme Court’s decision to hear challenges to the Patient Protection and Affordable Care Act, President Obama’s signature health care legislation. But the Court is also hearing some less publicized cases that could have an impact on heath care costs and consumer access to generic drugs.

The Supreme Court tackled one such case on Monday involving a patent dispute between two drug manufacturers. During an hour of oral arguments, the Court was asked to weigh competing claims as to when the manufacturer of a generic drug may legally file counterclaims against the patent holder of a brand name drug. The decision may have an impact on the ease with which generic drugs can be produced and introduced to the market in the US.

At its core, the case revolves around the textual interpretation of a specific section of the Drug Price Competition and Patent Term Restoration Act, known commonly as the Hatch-Waxman Act. The Supreme Court is considering the question of whether generic drug manufacturers being sued for patent infringement can file a counterclaim under the Hatch-Waxman Act to force brand name manufacturers to modify their patent description. [1]

When a brand-name manufacturer wishes to produce and market a new drug, it will procure a patent for the drug from the Patent and Trademark Office and file a New Drug Application (NDA) with the FDA for approval of the drug’s use. [2] The FDA can approve multiple uses for the same medication. In cases where the FDA does approve multiple uses, the manufacturer might hold a patent for only one or two of the approved uses. This is known as a method-of-use patent. Manufacturers of generics may submit an abbreviated new drug application (ANDA) to the FDA for approval to manufacture a generic drug for non-patented uses. [3]

The FDA has approved three uses for the type 2 diabetes drug, repaglinide. Novo Nordisk (Novo) manufactures repaglinide under the brand name Prandin, and has a patent for one of its approved uses. The patent specifies the use of repaglinide in combination with another drug, metformin. Novo held the patent for the use of repaglinide by itself, but that patent expired in 2009. None of the parties involved dispute the fact that Novo holds a patent for only one use of the drug. [4]

Patents are extremely valuable to the pharmaceutical industry, and the FDA tends to defer to pharmaceutical manufacturers by taking a hands-off approach to the evaluation and interpretation of pharmaceutical patents. Every year, the FDA produces a list, known as the Orange Book, of all drugs it has approved for safety and effectiveness. The Orange book is not a list of the patents themselves, but is rather a list of descriptions of patent uses. [5] When a manufacturer submits a patent for an Orange Book listing, they must also file a patent use code specifying, “…the approved indications or other conditions of use covered by [the] patent.” [6] The FDA references these patent use codes when considering a generic drug manufacturer’s ANDA to help determine whether the proposed generic will violate an existing method-of-use patent.

Caraco Pharmaceutical Laboratories, Ltd. (Caraco), anticipating the expiration of Novo’s patent, planned to produce a generic version of Prandin. In 2005, Caraco filed an abbreviated new drug application with the FDA, requesting approval to market the generic. Novo sued Caraco for patent infringement, and Caraco amended their application to specify they would not market the drug combination, only the use of repaglinide by itself, to ensure they would not be infringing on any existing patents. [7]

While the litigation was pending, Novo amended its Orange Book use code. The newly submitted code was much broader, removing the reference to using the drug in combination with metformin. [8] The new description of the drug’s use undermined Caraco’s application.

In response, Caraco invoked the counterclaim provision of the Hatch-Waxman Act in an attempt to force Novo to change its use code. The counterclaim provision states that, “…the applicant may assert a counterclaim seeking an order requiring the holder to correct or delete the patent information submitted by the holder…on the ground that the patent does not claim an approved method of using the drug.” [9]

The U.S. District Court for the Eastern District of Michigan agreed with Caraco and issued an injunction ordering Novo to change its use code to accurately reflect the scope of its patent. Novo appealed, and in a split 2-1 opinion the U.S. Court of Appeals for the Federal Circuit reversed, allowing Novo’s modified use code to stand. Caraco appealed to the Supreme Court.

The policies of the FDA and its interface with the Patent and Trademark Office in drug patenting and approval are an issue in this case. Since the patent office is not involved in drug approval, the branded manufacturer itself is responsible for describing the scope of its patent to the FDA. The process essentially involves the manufacturer telling the FDA how to interpret its patent, with no questioning or review by the governing body. The FDA depends on the manufacturer’s description and does not independently check the accuracy of the use codes manufacturers submit.

The majority opinion of the Federal Court set forth a narrow interpretation of the Hatch-Waxman Act. The court agreed with Novo in its reading of the statutory language. An approved method of using a drug, according to the majority, did not refer to a singular use but actually meant any method of using a drug. The opinion then went further, defining patent information to be only “…the patent number and the expiration date”, making the actual patent use description irrelevant. [10] The dissenting judge on the panel expressed concern about the majority’s interpretation, arguing that it would allow brand name drug manufacturers to use manipulative language to avoid competition from generics. [11]

In a brief to the Court and in oral arguments, Caraco claimed that the statutory language was clear. But they came to the opposite conclusion as to its meaning than that of the Federal Court. An approved use, they argue, means one use, in this case the use of repaglinide by itself and that use only. Since Novo does not hold the patent for that specific use, they argue, Caraco is clearly within its rights to request a correction of the code. [12]

During arguments, justices seemed conflicted over how broadly to interpret the language, and arguments over semantics ensued. In one opening exchange, Justice Samuel Alito asked attorney James Hurst, representing Caraco, “Suppose I said your brief does not cite a Supreme Court decision. Would that be a correct statement?” [13] (Justice Alito was implying that in his question the word “a” would mean any.) Hurst replied that it would be a fair statement, but disagreed with Justice Alito’s underlying assumption. Mr. Hurst claimed that if a justice were to say to him, “…you are going to lose this case because you didn’t cite an applicable precedent,” he would, “…hear that to mean I didn’t cite a specific particular case.” [14]

He continued, saying that the word “an” is routinely used to refer to one specific thing, and that the Court must look at the context of the language when considering the case. He then gave examples, including, “I got lost on my way to the party because I failed to make a turn,” and, “My cake fell because I did not include an ingredient.” [15] Justice Alito responded that there were oddities in the way Mr. Hurst was reading the text.

Justice Sotomayor appeared skeptical about the practical application of allowing such broad patent descriptions to stand. Questioning Mark Perry, counsel for Novo, she asked, “What this means practically I believe is that when your patent expires no generic can come in with a use that’s different than yours because they’re going to be boxed out by this indication, this overbroad indication. Do you actually think that’s what Congress intended? I thought…what Congress intended was to ensure that drugs got onto the market as quickly as possible.” [16]

Several parties submitting supporting briefs for Caraco, including the Generic Pharmaceutical Association, the AARP and the Obama Administration, worry about the consequences of allowing brand name manufacturers to broadly state their patent uses with no challenge from generic manufacturers. They argue that were the Federal Court’s decision to stand, branded manufacturers could arbitrarily push generics out of the market, resulting in increased costs to the consumer. [17]

Assistant to the Solicitor General Benjamin Horwich presented arguments on behalf of the Unites States during oral arguments. According to the Solicitor General, “Under the Federal Circuit’s decision, a brand-name manufacturer can effectively preclude generic competition by submitting an overbroad description of its method-of-use patent to FDA. Congress enacted the counterclaim provision at issue here to combat precisely that sort of manipulation.” [18]

Novo and other branded pharmaceutical manufacturers also argue that the Supreme Court’s decision could have unintended consequences. The Court, they argue, must consider the cost to the original creators of new drug therapies. They claim that if branded manufacturers are forced to spend money on patent litigation and face tougher competition from generic manufacturers, it could produce a chilling effect that discourages research and innovation. [19]

Parties on both sides of the case argue that the language of the Hatch-Waxman Act is clear, but come to opposite conclusions about its meaning. Both also both argue that a decision for the other party could result in unintended costs to consumers. The Supreme Court often splits along ideological lines in these types of cases, and discussions during oral arguments point to such an outcome. The question remains whether Justice Kennedy will once again have the deciding vote.

The case is Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S. A decision is expected in June.

Sources
[1] http://www.oyez.org/cases/2010-2019/2011/2011_10_844

[2] http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/NewDrugApplicationNDA/default.htm

[3] http://www.law.cornell.edu/supct/cert/10-844

[4] http://www.scotusblog.com/2011/11/argument-preview-federal-circuit-faces-uphill-battle-in-latest-generics-case/

[5] http://www.fda.gov/Drugs/InformationOnDrugs/ucm129662.htm

[6] http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfcfr/CFRSearch.cfm?fr=314.53

[7] Brief for Caraco Pharmaceutical Laboratories et al., available online at http://www.americanbar.org/content/dam/aba/publishing/previewbriefs/Other_Brief_Updates/10-844_petitioner.pdf

[8] http://jolt.law.harvard.edu/digest/patent/kappos-v-hyatt-caraco-pharm-labs-ltd-v-novo-nordisk-as

[9] http://www.law.cornell.edu/uscode/21/355.html

[10] http://www.bloomberglaw.com/public/document/Novo_Nordisk_v_Caraco_Pharmaceutical_Labs_Ltd_601_F3d_1359_95_USP

[11] Id.

[12] Reply brief for Caraco Pharmaceutical Laboratories et al., available online at http://sblog.s3.amazonaws.com/wp-content/uploads/2011/12/Caraco-Novo-SCT-Reply-Brief-for-Petitioners-FINAL.pdf

[13] No. 10-844, Arguments, available online at http://www.supremecourt.gov/oral_arguments/argument_transcripts/10-844.pdf

[14] Id.

[15] Id.

[16] Id.

[17] Brief for the United States of America, No. 10-844, available online at http://www.americanbar.org/content/dam/aba/publishing/previewbriefs/Other_Brief_Updates/10-844_petitioneramcuusa.pdf

[18] http://www.orangebookblog.com/2011/05/obama-administration-urges-supreme-court-to-grant-cert-in-case-on-orange-book-patent-use-codes.html

[19] Brief for Novo Nordisk A/S and Novo Nordisk Inc., available online at http://www.americanbar.org/content/dam/aba/publications/supreme_court_preview/briefs/10-844_respondent_amcu_novo_nordisk.pdf

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